#working capital adjustment

The Delhi ITAT partially upheld WSP Consultants’ appeal, directing the assessing officer to incorporate functional comparables and adjust working-capital for AY 2021-22, while striking out firms lacking comparable functions. This refines peer-selection under Rule 10B(2) for similar transfer-pricing cases.

ITAT Ahmedabad rules that once working capital adjustment is granted under the Transactional Net Margin Method (TNMM), imputing additional notional interest on delayed receivables constitutes double adjustment and is legally unsustainable. The decision reinforces that receivables are integral to primary transactions and cannot be re-characterized as loan financing for tax purposes.

ITAT Bangalore rules that the Related Party Transaction (RPT) filter must be applied uniformly across comparables in transfer pricing analyses. The Tribunal also mandates that working capital adjustments under the Transactional Net Margin Method (TNMM) must be based on average balance analysis, while interest on foreign currency receivables should be calculated using LIBOR+200 bps. The ruling sets a precedent for scientific rigor in benchmarking international transactions.